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OpenAI's AI-adjusted earnings numbers have echoes of Groupon and WeWork
- OpenAI's revenue is growing fast and could reach $100 billion in 2029, but the business is projecting losses from 2023 to 2028, with the cost of model training expected to reach $44 billion during that time.
- The most concerning part is that OpenAI is asking investors to exclude the billions of dollars it spends on training AI models when reporting earnings.
- Given that model training is one of the main things that OpenAI does, this move has raised concerns about the legitimacy of the business.
- An accounting expert has said excluding the cost of model training from earnings reports is 'not kosher.' This will become especially important if OpenAI tries an IPO in the coming years as the SEC does not allow companies to exclude many ongoing business costs.
- OpenAI's IPO plans could be jeopardized if it does go ahead with the plan to exclude training costs, which will be a large, ongoing expense of providing its services.
- Excluding the cost of the core thing you do has echoes of other failed tech startups from the past, such as Groupon, which had to change its accounting after the SEC objected to its earnings report.
- WeWork similarly asked investors to ignore the costs of much of what the company needed to do to run its business by focusing on an alternative profitability measure before filing for bankruptcy in 2023.
- OpenAI may spin whatever story they want with investors as a private company, however, this will stop when they give audited financial statements to investors, potentially as part of an eventual IPO.
- OpenAI did not respond to detailed questions on why it is asking investors to exclude the cost of model training from its financial documents.
- According to an expert, OpenAI 'will never be done' with training its AI models due to the need for constantly incorporating new information, making training costs a fundamental business expense.
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